Tax-free billions: Australia's largest companies haven't paid corporate tax in three years

PHOTO: Hundreds of companies in Australia haven't paid corporate tax in the last decade, and are taxed less than most individuals.

Qantas CEO Alan Joyce, one of the most prominent supporters of the Turnbull Government's proposed big business tax cut, presides over a company that hasn't paid corporate tax for close to 10 years.

The period roughly coincides with Mr Joyce's tenure at the helm of Australia's flag carrier.

Despite generating income of $106.4 billion, the flying kangaroo has avoided paying tax on that bounty since 2009, thanks to Australia's generous tax concessions, depreciation provisions and the ability to offset company losses against past and future profits.

New analysis by the ABC reveals Qantas is not alone — its tax behaviour is consistent with about 380 of Australia's largest companies. ATO corporate tax transparency data — confirmed in email exchanges with company representatives — reveals about one in five of the country's biggest companies have paid no tax for at least the past three years.

High-flyers land no tax

Not one of Australia's biggest airlines has paid corporate tax since at least 2013, including Virgin and its subsidiary Tigerair, Etihad, Emirates and Qatar

Each one of those companies has sold billions of dollars worth of tickets in Australia.

When asked for an explanation, both Qantas and Virgin pointed the ABC to their historical losses and the entirely legitimate use of Australia's tax laws that allow them to offset those losses against future profits indefinitely.

Both companies were at pains to point out that, notwithstanding their zero corporate tax liabilities, they had continued to collect and pay departure taxes, fuel and alcohol excises, payroll tax, GST and FBT.

Presumably that's what the Etihad spokesman was alluding to in his statement to the ABC.

"Etihad is fully compliant with all Australian tax requirements, and has paid all the taxes it is obligated to do so under Australian law."

EnergyAustralia's tax-free decade

At a time when Australian households have seen their electricity prices soar, the country's leading energy retailer, EnergyAustralia, hasn't been paying corporate tax. EnergyAustralia paid no corporate tax for the decade to 2016.

For the three years to June 2016, EnergyAustralia's 1.7 million electricity and gas customers across eastern Australia helped it record $24 billion worth of income on which no tax was paid.

An EnergyAustralia spokesperson said the company's performance, "reflects how the power-generation sector is underpinned by assets that were built last century".

"Since 2006, EnergyAustralia has written down the value of its assets by $1.9 billion."

How much tax did the big banks pay?

Ten years after the global financial crisis — which they are largely responsible for creating — some of the world's most prominent investment banks are collecting tidy sums of income in Australia and not paying corporate tax.

Among them is Malcolm Turnbull's old employer, Goldman Sachs, which recently won a lucrative contract with the NSW Government.

Described by Rolling Stone Magazine as, "the great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money", Goldman will be paid $16.5 million as the state's financial adviser on the sale of the $16.8 billion WestConnex motorway in NSW.

The investment bank generated revenue of $1.84 billion over three years but paid zero corporate tax.

Ditto for JPMorgan Chase which raked in $2.2 billion and hasn't paid corporate tax since at least 2013.

In one of the most audacious explanations advanced to the ABC for the non-payment of corporate tax, a spokesman for America's biggest bank said JPMorgan was still suffering the aftershocks of the financial crisis which meant its Australian operations continued to operate at a loss.

But late last year, it emerged JPMorgan Chase agreed to pay a record $13 billion fine to US federal and state authorities in 2013.

The purpose of this fine was to settle claims it had misled investors in the years leading up to 2008.

Could the bank be writing that fine off against its Australian income? The spokesman didn't care to elaborate.

Shifting profits overseas

Curiously, French bank BNP Paribas also appeared to have made some bad investments taxpayers were having to compensate it for.

It hasn't paid corporate tax for at least three years – like Goldman, JPMorgan Chase, American Express, Barclays Bank and the Royal Bank of Scotland.

The oldest foreign bank in Australia (resident here since 1881) told the ABC that despite attracting close to $10 billion in income since 2013, BNP failed to make any profits.

BNP said its losses, "included the write off of bad debts from lending to certain Australian domiciled companies".

As far as the local financial services sector goes, Babcock and Brown International stands out among the 2,000 company names in the Australian Taxation Office's public records.

Babcock and Brown remains the country's biggest corporate failure, having collapsed in 2009 with debts of more than $10 billion.

According to the ATO, Babcock and Brown International (a wholly owned subsidiary of the liquidated group, Babcock and Brown Ltd) reported $1.7 billion worth of income for the three years to 2016.

It paid no corporate tax.

CEO Michael Larkin, who has been with the Babcock group for 14 years, told the ABC the money was taxed elsewhere in the world where Babcock and Brown International engages in business.

He wouldn't be drawn on what the company does overseas, where or how much tax has been paid in other jurisdictions.

Australian tax law has allowed foreign companies to shift profits to affiliates or parent groups offshore in the guise of payments for services.

They've also been entitled to lend money to their Australian operations at inflated prices to create excessive tax deductions in Australia.

This can all work to render the Australian business loss-making, therefore not required to pay corporate tax.

The transparency misnomer

For local companies, the dividend imputation system is a unique tool that allows businesses to pass tax credits on to their investors.

Australia and New Zealand are now the only two OECD countries to offer imputation which results in around a third of corporate tax revenue in Australia being handed back to investors.

Put simply, it means a 30 per cent corporate tax rate with franked dividends raises roughly as much as a headline 20 per cent rate without them.

Over the past 30 years, a number of countries have abandoned dividend imputation, including the UK, Germany, Finland, Norway, Singapore and Malaysia.

Thanks to legislation passed in 2013, the Australian Tax Office now publishes an annual record of total income received, taxable income and tax payable for the roughly 2,000 Australian companies with annual turnovers of more than $100 million.

It's called The Corporate Tax Transparency Data which is somewhat of a misnomer given the numbers say nothing about how businesses use deductions and concessions to reduce their taxable incomes.

News Corp pays no tax on $71m profit

All the focus on the tax shenanigans of foreign technology and media companies has diverted our gaze from the taxpaying habits of some of their home grown rivals.

The most obvious one is Rupert Murdoch's News Corp, which hasn't paid corporate tax in Australia for at least four years.

The media colossus reported total income of $8.5 billion and even boasted a $71 million profit in 2014/15 but no corporate tax was paid.

The company's corporate affairs boss, Liz Deegan, wrote to the ABC to clarify that: "News Corp Australia has deductible operating costs and certain tax incentives and allowable credits, like R&D and franking credits, that offset the revenue disclosed."

Its partly owned pay-TV company, Foxtel, received a $30 million gift from the Federal Government in the last budget, ostensibly to provide better coverage of female sports.

In the three years prior, Foxtel had also not paid corporate tax. Fairfax, News Corp's newspaper rival in Australia, paid $53.1 million in corporate tax over the same period.

The tax-free club

Software giant Atlassian also pointed to R&D tax concessions when explaining why it too hasn't paid corporate tax for the past two years on accumulated income just shy of $1 billion.

A tally of the three years' available data reveals some of this country's most recognised names haven't paid corporate tax since at least 2013.

They include Broadspectrum (formerly Transfield Services) which collected $8.6 billion in income over three years. An estimated 30 per cent of that income ($2.5 billion) was paid directly by the Federal Government for running Australia's offshore detention facilities. Broadspectrum was taken over by Spanish conglomerate Ferrovial in 2016.

Among the others who've escaped paying any corporate tax for three years are Bluescope Steel, Ansell,Amcor, Billabong International and Transurban Holdings.

The big property and construction companies Lend Lease, Grocon, Stockland and GPT are also part of the corporate tax-free club.

Mackay Sugar and CSR who've been lobbying against a sugar tax haven't paid corporate tax for three years either.

Not going down without a fight

The Turnbull Government knows well that forensic tax audits are an expensive and resource-sapping exercise, especially when they involve the complex interpretation of other countries' tax codes and their intersection with ours.

Federal Treasurer Scott Morrison has committed $679 million over four years to a new Tax Avoidance Taskforce.

New laws to combat complicated corporate structures whose core purpose is to avoid tax have also been passed.

But if Australia wants the likes of Apple, Google and Facebook to pay more tax on the phones and advertising it sells in Australia, some of our biggest taxpayers, BHP and Rio Tinto should arguably be paying more tax in China where they sell most of their iron ore.

Among all the murky detail of corporate tax arrangements, one thing is clear: companies with the financial firepower of BHP and Rio Tinto aren't going to accept a negative assessment from the ATO without a fight.

Both of Australia's biggest miners are currently in dispute over their Singaporean marketing operations (corporate tax rate of 17 per cent).

Convoluted corporate arrangements see BHP and Rio sell commodities they've mined in Australia to their Singapore businesses, which on-sell the iron ore et al in to export markets (predominantly China) often with a hefty mark-up.

Former treasurer Wayne Swan has accused the miners of lying and labelled their marketing strategy "tax evasion".

The ATO rejects the legitimacy of the tax structure and is seeking $1 billion in tax, interest and penalties from BHP and about half that ($500 million) from Rio.

A BHP spokesman told the ABC, "The primary tax in dispute represents less than 2 per cent of the $66 billion in taxes and royalties paid in Australia over that 11-year period … BHP does not agree with the ATO's position.

"Consequently, we have objected to all the amended assessments and intend to continue to defend our position, including by initiating court action if necessary."

Perhaps unsurprisingly, some of the country's most trusted corporate advisers, including the Boston Consulting Group and MYOB, paid no tax for the three years to 2016.

Even the industry groups — Chartered Accountants (CAANZ) and the Certified Practising Accountants (CPA) have paid nothing, or next to nothing, in corporate tax over the that period on account of their "mutual" status which excludes membership fees from assessable income.

CPA Australia reeled in $493 million in income between 2013 and 2016.

Australia's tax laws allowed them to pay just $1,967.00 in corporate tax.

Chartered Accountants Australia and New Zealand is a relatively new group.

In its two years as a registered entity for tax purposes it has paid zero corporate tax on $240 million in income.